Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES [x] NO [ ]

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of
the Exchange Act.

The accompanying notes are an integral
part of these condensed consolidated financial statements.

-3-

AuraSource, Inc.

Condensed Consolidated Statements
of Operations

(Unaudited)

Three Months Ended December 31,

Nine Months Ended December 31,

2014

2013

2014

2013

Revenue

$

486,668

$

—

$

531,668

$

104,820

Cost of revenue

385,069

—

401,569

72,859

Gross profit

101,599

—

130,099

31,961

Operating expenses:

General & administrative expenses

323,872

233,437

1,110,185

926,041

Total operating expenses

323,872

233,437

1,110,185

926,041

Loss from operations

(222,273

)

(233,437

)

(980,086

)

(894,080

)

Interest income (expense) and other, net

(3,262

)

(52,093

)

(86,883

)

(371,041

)

Net loss applicable to common stockholders

$

(225,535

)

$

(285,530

)

$

(1,066,969

)

$

(1,265,121

)

Basic & diluted loss per share

$

(0.00

)

$

(0.01

)

$

(0.02

)

$

(0.02

)

Weighted average shares outstanding

58,424,734

52,089,903

58,420,006

51,672,516

The accompanying
notes are an integral part of these condensed consolidated financial statements.

-4-

AuraSource, Inc.

Condensed Consolidated Statements
of Cash Flows

(Unaudited)

Nine Months Ended December 31,

2014

2013

Cash flows from operating activities

Net loss

$

(1,066,969

)

$

(1,265,121

)

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

152,431

226,124

Stock issued for services and interest

—

259,583

Options issued for services

205,816

10,385

Bad debt expenses

60,000

—

Changes in operating assets and liabilities

Due from affiliate

—

(1,390

)

Accounts receivable

50,000

—

Inventory

—

(32,580

)

Deposits and other current assets, net

2,036

79,145

Accounts payable and accrued expenses

105,143

56,569

Accounts payable – related parties

253,395

287,981

Interest payable

107,639

—

Deferred revenue

37,500

(63,754

)

Customer advances

5,832

—

Net cash used in operating activities

(87,177

)

(443,058

)

Cash flows from investing activities

Cash paid for acquisition of intangible

—

(8,088

)

Net cash used in investing activities

—

(8,088

)

Cash flows from financing activities

Proceeds from issuance of common stock, net

338,527

—

Net proceeds from issuance of notes payable

—

190,501

Repayment of note payable

(177,500

)

(87,345

)

Net proceeds from loans payable

—

195,485

Advances from related parties, net

(36,518

)

95,716

Net cash provided by financing activities

124,509

394,357

Net change in cash and equivalents

37,332

(56,789

)

Cash - beginning balance

11,112

75,508

Cash - ending balance

$

48,444

$

18,719

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for

Interest

$

—

$

2,361

Income taxes

$

—

$

—

NON-CASH INVESTING AND FINANCING ACTIVITY

The Company issued 1,250,000 shares of common stock for settlement of a 500,000 deposit from customer.

$

—

$

500,000

The accompanying notes are an integral
part of these condensed consolidated financial statements.

-5-

AURASOURCE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Current Operations
and Background — AuraSource, Inc. (“AuraSource” or “Company”) focuses on the development
and production of environmentally friendly and cost effective industrial energy and fuel used for industrial applications. AuraMetal,
AuraSource’s core technology, includes ultrafine grinding and impurities removal processes. Initial industrial applications
of AuraSource technology are ultra-fine coal water mixture for heavy oil substitution, and low grade iron ore fine and slimes beneficiation.
AuraSource formed AuraSource Qinzhou Co. Ltd. (“Qinzhou”), a wholly owned subsidiary in China, to acquire these types
of Hydrocarbon Clean Fuel (“HCF”) technologies, performing research and development (“R&D”) related
to the reduction of harmful emissions and energy costs for HCF technology and products based on this technology, licensing HCF
technology to third parties and selling services and products derived from this technology. Currently, we have seven patents patent
issued related to our technologies: 1) ultrafine grinding and 2) ultrafine separation.

There can be no
assurance we will be able to carry out our development plans for our HCF technology. Our ability to pursue this strategy is subject
to the availability of additional capital and further development of our HCF technology. We also need to finance the
cost of effectively protecting our intellectual property rights in the United States (“US”) and abroad where we intend
to market our technology and products.

Going Concern
— The accompanying unaudited consolidated financial statements were prepared assuming the Company will continue as a going
concern. The Company has suffered recurring losses from operations since its inception and has an accumulated deficit
of $12,008,219 at December 31, 2014. The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary
should the Company be unable to continue its existence. The recovery of the Company’s assets is dependent upon
continued operations of the Company. In addition, the Company's recovery is dependent upon future events, the outcome of which
is undetermined. The Company intends to continue to attempt to raise additional capital, but there can be no certainty
such efforts will be successful.

Basis of Presentation
and Principles of Consolidation — The accompanying condensed consolidated financial statements were prepared in conformity
with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts
of AuraSource and its subsidiary, Qinzhou. All significant intercompany transactions and balances were eliminated in consolidation.

The unaudited consolidated
financial statements were prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are,
in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with US GAAP was omitted
pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes for the year ended March 31, 2014 included in our Annual Report on Form 10-K. The
results of the three and nine months ended December 31, 2014 are not necessarily indicative of the results to be expected for the
full year ending March 31, 2015.

Use of Estimates
— The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Cash and Equivalents
— We consider investments with original maturities of 90 days or less to be cash equivalents.

-6-

Accounts Receivable
- The Company extends credit to its customers. Collateral is generally not required. Credit losses are provided for
in the financial statements based on management’s evaluation of historical and current industry trends. Although the Company
expects to fully collect amounts due, actual collections may differ from estimated amounts. The Company estimates an allowance
for doubtful accounts based upon a percentage of revenue earned. When the Company expects that there is less than a 20% chance
of collection, the Company writes the receivable off to its allowance for doubtful accounts. The Company does not typically accrue
interest or fees on past due amounts. During the three months ending December 31, 2014, the Company recorded an allowance for doubtful
accounts of $60,000.

Inventory -
Inventory is valued at the lower of cost or market. Cost is determined using standard costs, which approximates the first-in, first-out
method.

Property
and Equipment - Property and Equipment are stated at historical cost less accumulated depreciation and amortization.
Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation
is provided on a straight-line basis over the assets' estimated useful lives. The useful lives of the assets are as follows: machinery
and equipment 3 years, office equipment 3 years, vehicles 5 years. Additions and improvements are capitalized while routine repairs
and maintenance are charged to expense as incurred. Upon sale or disposition, the historically recorded asset cost and accumulated
depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to other income
/ expense.

Revenue
Recognition - The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. ASC 605 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. When we are
paid in advance for products or services we classify these amounts as deferred revenue and recognize over the term of the agreement.

Cost of goods sold- Cost
of goods sold includes cost of inventory sold during the period, net of discounts and allowances, freight and shipping costs, warranty
and rework costs, and sales tax.

Impairment
of Long-Lived Assets and Long-Lived Assets to Be Disposed Of- In accordance with ASC 350-30, we evaluate long-lived assets
for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When
such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset
or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is
based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash
flows, of those assets and is recorded in the period in which the determination is made. We currently believe there
is no impairment of our long-lived assets. There can be no assurance, however, that market conditions will not change
or demand for our products under development will continue. Either of these could result in future impairment of long-lived
assets.

Beneficial
Conversion Features- From time to time, the Company may issue convertible notes that may contain an embedded beneficial
conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the
underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after
first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have
been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount
to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective
interest method.

Income Taxes
— The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 740, “Income Taxes.” Deferred tax assets and liabilities are
recognized to reflect the estimated future tax effects, calculated at currently effective tax rates, of future deductible or taxable
amounts attributable to events that have been recognized on a cumulative basis in the financial statements. A valuation allowance
for a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized.

-7-

Stock-Based
Compensation — The Company recognizes the cost of employee services received for an award of equity instruments in
the consolidated financial statements over the period the employee is required to perform the services.

Foreign Currency
Transactions — The Company recognizes foreign currency gains and losses in other income (expense) on the accompanying
statement of operations. Foreign currency gains and losses arise as the Company conducts business with other entity’s whose
functional currency is not in US dollars. Generally, these gains and losses are recorded at an exchange rate difference between
the foreign currency and the functional currency that arises between the transaction date and the payment date.

Net Loss Per
Share — The Company computes basic and diluted net loss per share by dividing the net loss available to common stockholders
for the period by the weighted average number of shares of common stock outstanding during the period. Common equivalent shares
arising from stock options and warrants were excluded from the computation of basic and diluted earnings per share, for the three
and nine months ended December 31, 2014 and 2013 because their effect is anti-dilutive.

Concentration
of Credit Risk — Financial instruments that potentially subject the Company to a concentration of credit risk consist
of cash. The Company maintains its cash with high credit quality financial institutions; at times, such balances with
any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits.

Financial
Instruments and Fair Value of Financial Instruments — Our financial instruments consist of cash, accounts payable
and notes payable. The carrying values of cash, accounts payable and notes payable are representative of the fair values due to
their short-term maturities. We measure the fair value (“FV”) of financial assets and liabilities on a recurring basis.
FV is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. FV measurements are to be considered from the perspective of a market participant
that holds the asset or owes the liability. We also establish a FV hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring FV.

The standard describes
three levels of inputs that may be used to measure FV:

Level 1:

Quoted prices in active markets for identical or similar assets and liabilities.

Level 2:

Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.

Level 3:

Unobservable inputs that are supported by little or no market activity and that are significant to the FV of the assets or liabilities.

The Company
evaluates embedded conversion features within convertible debt under ASC Topic 815, “Derivatives and Hedging,” to
determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative
at FV with changes in FV recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the
instrument is evaluated under ASC subtopic 470-20, “Debt with Conversion and Other Options,” for consideration
of any beneficial conversion feature.

Reclassifications
— Certain reclassifications were made to the prior period amounts disclosed in the consolidated financial statements to conform
to the presentation form the three and nine months ended December 31, 2014. These reclassifications had no effect on reported net
loss or stockholders’ equity.

Recent Accounting
Pronouncements – There were no significant changes in the Company’s critical accounting policies and estimates
during the nine months ended December 31, 2014 compared to what was disclosed in the Company’s Annual Report on Form 10-K
for the year ended March 31, 2014.

-8-

NOTE 2 - CONCENTRATION OF CREDIT
RISK

We maintain our
cash balances in financial institutions that from time to time exceed amounts insured by the FDIC (up to $250,000, per financial
institution as of December 31, 2014). As of December 31, 2014 and March 31, 2014, our deposits did not exceeded insured amounts.
We have not experienced any losses in such accounts and we believe we are not exposed to any credit risk on cash.

Currently, we maintain
a bank account in China. This account is not insured and we believe is exposed to credit risk on cash.

NOTE 3 – DEPOSITS AND OTHER
CURRENT ASSETS

Deposits and other
current assets were $582,652 and $584,689 as of December 31, 2014 and March 31, 2014, respectively, and were comprised of the following:

December 31, 2014

March 31, 2014

(Unaudited)

(Audited)

Inventory

$

42,580

$

42,580

Shipping deposits

17,123

10,205

Mineral reserve deposits

516,045

525,000

Prepaid expenses

6,904

6,904

Ending Balance

582,652

$

584,689

NOTE 4 – FIXED ASSETS, NET

Fixed assets, net consisted of the following:

December 31,

March 31,

2014

2014

(Unaudited)

(Audited)

Office equipment

$

5,013

$

5,013

Vehicles

147,390

147,390

Equipment

391,118

391,118

Total fixed assets

543,521

543,521

Less accumulated depreciation

(375,744

)

(258,652

)

Total fixed assets, net

$

167,777

$

284,869

The depreciation
expense for the three and nine months ended December 31, 2014 was $38,441 and $117,092, respectively. The depreciation expense
for the three and nine months ended December 31, 2013 was $40,208 and $120,626, respectively.

NOTE 5 – INTANGIBLE ASSETS,
NET

We entered into
an agreement with Beijing Pengchuang Technology Development Co. (“Pengchuang”), Ltd., an independent Chinese company,
to purchase 50% of the intellectual property related to ultrafine particle processing. Pengchuang developed a highly efficient
and low energy consumption grinding technology, which utilizes fluid shock waves to make ultrafine particles. This technology can
be applied to the coal water slurry, solid lubricant and other material grinding processes. Through a joint development and ownership
agreement, AuraSource will enrich its intellectual property portfolio, enabling the further development of AuraMetal, its HCF technology.
AuraSource Qinzhou will utilize the particle grinding technology in its AuraMetal Qinzhou production line, as well as license it
to others in non-related industries.

-9-

The net intangibles
were $745,243 and $780,582 as of December 31, 2014 and March 31, 2014. We issued 600,000 shares of common stock for the acquisition
of certain intangibles. The shares issued in connection with $753,530 of the acquired intangibles were valued at $606,000 or $1.01
per share which was the share price on August 8, 2010, the acquisition date. The Company paid cash for the remainder of the amount
due. The Company recorded $11,780 and $11,765 in amortization expense in the three months ended December 31, 2014 and 2013, respectively.
The Company recorded $35,339 and $35,296 in amortization expense in the nine months ended December 31, 2014 and 2013, respectively.

NOTE 6 – DUE TO RELATED PARTIES

As of December 31,
2014 and March 31, 2014, $1,364,322 and $1,147,446, respectively, is owed to the officers and directors of the Company. As of December
31, 2014, $368,841 is from the advancement of expenses and $995,480 is for past due compensation. As of March 31, 2014, $325,608
is from the advancement of expenses and $821,838 is for past due compensation.

NOTE 7 – NOTE PAYABLE

On December 31,
2012, the Company received $500,000 from Pelican Creek, LLC (Pelican Creek”), an unrelated party, and recorded the corresponding
note as a current liability on the balance sheet. As an inducement to receive this loan, the Company issued 1,250,000 shares of
its common stock to Pelican Creek for the year ended March 31, 2013. The FV of the shares issued was $812,500 valued at $0.65 per
share, using the closing price on the effective date of the agreement. See Note 11, Stock Issuance, for further details. The coupon
interest on this note accrues daily on the outstanding principal amount at 8% per annum. On March 26, 2014, the Company issued
2,000,000 shares of common stock in exchange for the cancelation of a $500,000 note payable. As such, as of December 31, 2014,
the Company accrued interest of $60,000 and remains in the note payable account with no conversion right.

In the quarter ended
March 31, 2014, the Company issued a note payable of $44,000 to Andis with no conversion right and interest of $1,000 per week
which was paid in full on April 30, 2014 for $49,000.

NOTE 8 – CONVERTIBLE NOTES
PAYABLE

On March 19, 2014,
the Company entered into an SPA with Asher. Under the terms of the SPA, the Company issued to Asher a convertible promissory note
of $83,500. The note had a nine month maturity date from issuance. The note bears interest at 8%. The note holder can convert the
note after 180 days after the date of advance. Any principal or interest on this note which is not paid when due shall bear interest
at 22% from the due date until paid. The conversion price shall equal the variable conversion price, 61% multiplied by the market
price (representing a discount rate of 39%). Market price is the average of the lowest three trading prices for the common stock
during the ten trading day period ending on the latest complete trading day prior to the conversion date. On July 15, 2014, the
Company paid the note in full.

NOTE 9 – STOCK ISSUANCE

On June 4, 2014,
we issued 20,000 shares of the Company common stock for $6,000 at a share price of $0.30. On February 3, 2015, the Company issued
1,781,920 shares of its common stock at $0.20 per share for a total of $356,384.

-10-

NOTE 10 - STOCK OPTIONS

In January 2009,
we granted 60,000 options to purchase shares of our common stock at $3.50 per share to members of our BOD. In April 2010, we granted
an additional 60,000 options to purchase shares of our common stock at $1.00 per share to members of our BOD. The options vest
quarterly and have an expiration period of 10 years. In April 2011, we granted an additional 60,000 options to purchase shares
of our common stock at $0.75 per share to certain members of our BOD. The options vest quarterly and have an expiration period
of 10 years. In February 2012, we granted an additional 2,850,000 options to purchase shares of our common stock at $0.28 per share
to certain members of our BOD. The options will vest upon the Company earning $5 million in revenues. The options expire in 5 years.
In April 2012, we granted an additional 60,000 options to purchase shares of our common stock at $0.27 per share to certain members
of our BOD. In April 2013, we granted an additional 60,000 options to purchase shares of our common stock at $0.45 per share to
certain members of our BOD. In January 2014, we granted 200,000 options to purchase shares of our common stock at $0.25 per share
to certain our CEO and CFO. In April 2014, we granted an additional 60,000 options to purchase shares of our common stock at $0.50
per share to certain members of our BOD. In April 2014, we granted 200,000 options to purchase shares of our common stock at $0.25
per share to certain our CEO and CFO per their employment agreements. In July 2014, we granted 200,000 options to purchase shares
of our common stock at $0.25 per share to certain our CEO and CFO per their employment agreements. In October 2014, we granted
200,000 options to purchase shares of our common stock at $0.25 per share to certain our CEO and CFO per their employment agreements.

We will record stock
based compensation expense over the requisite service period, which in our case approximates the vesting period of the options.
During the three and nine months December 31, 2014, the Company recorded $8,881 and $199,836 in compensation expense arising from
the vesting of options, respectively. The Company assumed all stock options issued during the quarter will vest. Though these expenses
result in a deferred tax benefit, we have a full valuation allowance against the deferred tax benefit.

The Company adopted
the detailed method provided in FASB ASC Topic 718, “Compensation – Stock Compensation,” for
calculating the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of
employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash
Flows of the income tax effects of employee stock-based compensation awards that are outstanding.

The fair value of
each stock option granted is estimated on the grant date using the Black-Scholes option pricing model (“BSOPM”). The
BSOPM has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk
free interest rate is based upon market yields for United States Treasury debt securities at a 7-year constant maturity. Dividend
rates are based on the Company’s dividend history. The stock volatility factor is based on the last 60 days of market prices
prior to the grant date. The expected life of an option grant is based on management’s estimate. The fair value of each option
grant, as calculated by the BSOPM, is recognized as compensation expense on a straight-line basis over the vesting period of each
stock option award.

These assumptions
were used to determine the FV of stock options granted:

Dividend yield

0.0%

Volatility

25% to 159%

Average expected option life

2.5 to 5 years

Risk-free interest rate

0.68% to 2.59%

-11-

The following table
summarizes activity in the Company's stock option grants for the nine months ended December 31, 2014:

Number of Shares

Weighted Average Price Per Share

Balance at March 31, 2014

3,350,000

$

0.36

Granted

660,000

$

0.25

Balance at December 31, 2014

4,010,000

$

0.35

The following summarizes
pricing and term information for options issued to employees and directors outstanding as of December 31, 2014:

The information
contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended
March 31, 2014 and presume readers have access to, and will have read, the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion
and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial
statements included elsewhere in this Form 10-Q.

The following
discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are
not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond
our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on
any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on
Form 10-K for the year ended March 31, 2014 in the section entitled “Risk Factors” for a description of certain risks
that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility
to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in
conjunction with the unaudited consolidated financial statements and notes thereto that appear elsewhere in this report.

Overview

We focus on the
development and production of environmentally friendly and cost effective industrial energy and feedstock used for industrial applications.
AuraMetal, AuraSource’s core technology, includes ultrafine grinding and impurities removal processes. Initial industrial
applications of AuraSource technology are ultra-fine coal water mixture for heavy oil substitution, and low grade iron ore fine
and slimes beneficiation. AuraSource formed Qinzhou to acquire these types of HCF technologies; to perform research and development
related to the reduction of harmful emission and energy costs; to license HCF technology to third parties; and to sell services
and products derived from these technologies. Currently, we have seven patents patent issued related to our technologies: 1) ultrafine
grinding and 2) ultrafine separation.

On February 15,
2012, we entered into an agreement with GCH to reserve export ready 1 million tons of 64% Fe higher content iron ore and 13 million
tons of 45% grade lower content iron ore, and 2 million tons of manganese ore. We agreed to issue the Mineral Deposit Shares to
GCH or its assigns. The Mineral Deposit Shares shall vest and be delivered as follows; 5 million immediately, 11 million upon the
successful completion of the first customer order over $5 million. Success is defined as customer acceptance of order and final
payment. To the extent a successful order does not occur the unvested Mineral Deposit Shares shall be returned to our treasury
and cancelled. Additionally, we entered into an agreement with GCM to purchase Minerals which will be delivered loose in bulk modified
FOB. We entered into an agreement with GCH appointing GCH as the exclusive North American licensee for use and exploitation of
our technology as relates to applications involving precious metals in exchange for royalty payments of five percent of gross revenues.

-13-

Critical Accounting Policies and
Estimates

The preparation
of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates which are based on historical experience
and on other assumptions that we believe to be reasonable under the circumstances. The result of these evaluations forms the basis
for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions. The following accounting
policies require significant management judgments and estimates:

We account for our
business acquisitions under the purchase method of accounting in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 805, "Business Combinations." The total cost of acquisitions
is allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over
the estimated fair value of the tangible net assets acquired is recorded as intangibles. Determining the fair value of assets acquired
and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including
assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items.

We base our estimates
on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources.
There can be no assurance that actual results will not differ from these estimates.

Results of Operations

For the Three Months Ended December 31, 2014 and 2013

Revenues

Revenues were $486,668
and $0 for the three months ended December 31, 2014 and 2013, respectively. The increase in revenue was attributable to the commencement
of shipping minerals and the sale of mineral processing technology.

Gross Profit

Gross profit was
$101,599 and $0 for the three months ended December 31, 2014 and 2013.

General and Administrative Expenses

General and administrative
expenses were $323,872 and $233,437 for the three months ended December 31, 2014 and 2013, respectively. The increase of $90,435
was due primarily to increase in salaries, bad debt expense, offset by decrease in professional services for the three months ended
December 31, 2014 compared to 2013.

Interest Income (Expense) and Other

Interest income
(expense) and other was $(3,262) and $(52,093) for the three months ended December 31, 2014 and 2013, respectively. The interest
expense for the three months ended December 31, 2014 was primarily due to the outstanding note payables. The interest expense for
the three months ended December 31, 2013 was primarily due to finance charges incurred in connection with obtaining loans from
unrelated parties. The decrease was the result of the payoff of notes payable.

-14-

For the Nine Months Ended December 31, 2014 and 2013

Revenues

Revenues were $531,668
and $104,820 for the nine months ended December 31, 2014 and 2013, respectively. The increase in revenue was attributable to the
commencement of shipping minerals and the sale of mineral processing technology.

Gross Profit

Gross profit was
$130,099 and $31,961 for the nine months ended December 31, 2014 and 2013.

General and Administrative Expenses

General and administrative
expenses were $1,110,185 and $926,041 for the nine months ended December 31, 2014 and 2013, respectively. The increase of $184,144
was due primarily to an increase in rent, bad debt, and stock compensation expense for the nine months ended December 31, 2014
compared to 2013.

Interest Income (Expense) and Other

Interest income
(expense) and other was $(86,883) and $(371,041) for the nine months ended December 31, 2014 and 2013, respectively. The interest
expense for the nine months ended December 31, 2014 was primarily due to the outstanding note payables. The interest expense for
the nine months ended December 31, 2013 was primarily due to finance charges incurred in connection with obtaining loans from related
and unrelated parties and recording $197,083 in interest income (expense) and other, for issuance of 437,963 common shares in lieu
of these charges and a loss on settlement of customer deposit of $62,500. In addition, the Company recorded amortization of the
beneficial conversion feature on convertible notes payable of $66,834 for the nine months ended December 31, 2013.

Liquidity and Capital Resources

Net cash used in
operating activities was $87,177 and $443,058 in the nine months ended December 31, 2014 and 2013, respectively. The decrease in
cash used for operations was mainly due to the reduced net loss

Net cash used in
investing activities was $0 and $8,088 in the nine months ended December 31, 2014 and 2013, respectively. The difference was the
decrease in capital expenditures on intangibles purchases for the nine months ending December 31, 2014.

Net cash provided
by financing activities was $127,509 and $394,357 in the nine months ended December 31, 2014 and 2013, respectively.

The Company suffered
recurring losses from operations and has an accumulated deficit of $12,008,219 at December 31, 2014. The Company has incurred losses
of $1,066,969 and $894,080 for the nine months ended December 31, 2014 and 2013, respectively. The Company has not continually
generated significant revenues. Unless our operations continue to generate significant revenues and cash flows from operating activities,
our continued operations will depend on whether we are able to raise additional funds through various sources, such as equity and
debt financing, other collaborative agreements and strategic alliances. Our management is actively engaged in seeking additional
capital to fund our operations in the short to medium term. Such additional funds may not become available on acceptable terms
and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

Inflation and Seasonality

Inflation has not
been material to us during the past five years. Seasonality has not been material to us.

-15-

Recent Accounting Pronouncements

Refer to the notes
to the consolidated financial statements in our March 31, 2014 Annual Report on Form 10-K for a complete description of recent
accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those
significant accounting standards that have been adopted during the current year.

Off-Balance Sheet Arrangements

As of December 31,
2014, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

-16-

ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.

As a “smaller
reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item
3.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation
of Disclosure Controls and Procedures: We conducted an evaluation under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures. The term "disclosure controls and procedures", as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures
of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated
and communicated to the company's management, including its principal executive and principal financial officers, or persons performing
similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2014, that our disclosure controls and procedures
are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of
any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management's
Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. Our ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with US GAAP. The internal controls for the Company are
provided by executive management's review and approval of all transactions. Our ICFR also includes those policies and
procedures that:

Pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts and expenditures
are being made only in accordance with the authorization of our management; and

Provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on the financial statements.

Because
of its inherent limitations, ICFR may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Management
assessed the effectiveness of the Company's ICFR as of December 31, 2014. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Management's assessment included an evaluation of the design of our ICFR and testing of the operational effectiveness of these
controls.

Based on this
assessment, management has concluded that as of December 31, 2014, our ICFR was effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US
GAAP.

-17-

This quarterly
report does not include an attestation report of the Company's registered public accounting firm regarding ICFR. Management's
report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC
that permit the Company to provide only management's report in this annual report.

Changes in
Internal Control over Financial Reporting: There were no changes in our ICFR during the quarter ending December 31,
2014 that have materially affected, or are reasonably likely to materially affect, our ICFR.

-18-

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

We are not a party
to any current or pending legal proceedings that, if decided adversely to us, would have a material adverse effect upon our business,
results of operations, or financial condition, and we are not aware of any threatened or contemplated proceeding by any governmental
authority against us. To our knowledge, we are not a party to any threatened civil or criminal action or investigation.

ITEM 1A – RISK FACTORS

In addition to the
other risk factors and information set forth in this report, you should carefully consider the factors discussed in Part I, “Item
1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2014, which could materially affect our
business, financial condition or future results. The risks described in our Annual Report on Form 10-K is not the only risks facing
the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition, operating results and/or cash flows.

ITEM 2 - UNREGISTERED SALES OF EQUITY
SECURITIES

During the nine
months ended December 31, 2014, the Company issued 20,000 shares of common stock for $6,000. On February 3, 2015, the Company issued
1,781,920 shares of its common stock at $0.20 per share for a total of $356,384. The issuances of the shares of our common stock
to investors is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”),
pursuant to Section 4(2) thereof and Rule 506 of Regulation D (“Regulation D”) as promulgated by the SEC under the
Securities Act, as the shares were sold to accredited investors and were not sold through any general solicitation or advertisement.
The shares sold by the Company have not been registered under the Securities Act of 1933 and may not be offered or sold in the
United States absent such registration or an available exemption from registration.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 - OTHER INFORMATION

None

ITEM 6 – EXHIBITS

Exhibit

Description

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

-19-

SIGNATURES

Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

AURASOURCE, INC.

Date: February 13, 2015

/s/ PHILIP LIU

Name: Hongliang Philip Liu

Title: Chief Executive Officer

Date: February 13, 2015

/s/ ERIC STOPPENHAGEN

Name: Eric Stoppenhagen

Title: Chief Financial Officer

-20-

EXHIBIT INDEX

Exhibit

Description

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Site Links

Based on public records. Inadvertent errors are possible. Getfilings.com does not guarantee the accuracy or timeliness of any information on this site. Use at your own risk.
This website is not associated with the SEC.